Two city-based cos to raise funds via SME IPO route

Source: The Hitavada      Date: 09 Feb 2018 10:33:19


By Ravi Chandpurkar,

Eight more companies are awaiting SEBI nod

There is good news for investors who want to multiply their money as several small and medium enterprises (SMEs) are gearing up to go public. They are preferring to raise capital through the SME IPO route for their future expansion and climb up the chart of progress.

Of them, two city-based SMEs will be coming out with their initial public offering (IPO) on the BSE SME IPO Index within three months. Nakoda Group of Industries Limited and Farmico Cold Chain and Logistics Limited have bagged the approval to the Draft Red Herring Prospectus (DRHP) by the Securities and Exchange Board of India (SEBI).
Nakoda Group of Industries deals with fruit and vegetable processing and will be coming out with a IPO with a paid up capital of Rs 6.60 crore.

Similarly, Farmico Cold Storage Limited is into the business of cold storage and logistics and will be offering an IPO of Rs 15 crore. It is setting up a cold storage project which is sanctioned by the Ministry for Food Processing Industries (MFPI), Government of India and a logistic hub at Vashi, Navi Mumbai.

“In addition to these two companies, there are more than eight companies which have already submitted or are in the process of submitting the Draft Red Herring Prospectus (DRHP) with SEBI,” said CA Anand Daga, Assistant Director of Pantomath Capital Advisors Private Limited while talking to The Hitavada on Thursday.

Daga said that more companies are raising capital through the SME IPO to fund expansion projects and become more competitive in the domestic and international markets. The IPO option is one of the cheapest ways to raise funds as compared to take funds from the banks as a loan.

It can also be used to reduce bank debt. “Banks ask for collateral as they are doubtful of the credibility of the SME. The IPO listing process take about three to four months,” he added.
Till now, four city based SMEs have already been listed on the BSE SME Index -- DRA Consultants Limited, ADCC Infocad Limited, Emkay Taps and Cutting Tools Limited and Shradha Infra Properties Limited.

These companies are offering good returns to share holders. On February 8, DRA Consultants Limited was trading at Rs 35 per share, ADCC Infocad Limited at Rs 210.10 per share, Emkay Taps and Cutting Tools Limited at Rs 665.50 per share and Shradha Infra Properties Limited at Rs 60 per share, he said.

Furthermore, the BSE SME platform is providing good returns to investors. The market value of the share depends on the Profit Earning Ratio. SMEs should have paid up capital of a minimum Rs 3 crore and maximum Rs 25 crore. But, the IPO should be minimum Rs 1 crore and can go up to Rs 100 or even more, Daga added. He said that SMEs are the backbone of the country and contribute 15 per cent towards GDP and have 46 per cent share
in exports. There are more than 300 SMEs listed on the bourses, he said.